SINGAPORE, July 19 (Reuters) - Brent crude rose close to$106 on Thursday to hit a 7-week high, fuelled by MidEasttension, while comments by the U.S. Federal Reserve downplayingthe risk of a double-dip recession in the world's biggesteconomy renewed hopes of oil demand recovery.

Brent crude gained for a seventh straight day,rising to $106.01, its highest since May 30. By 0612 GMT, it wasup 81 cents at $105.97 a barrel. U.S. oil gained 76 centsto $90.62 and also touched a seven-week high.

"U.S. crude rising above $90 implies that overall sentimentis turning positive," said Tetsu Emori, a Tokyo-basedcommodities fund manager at Astmax Investments. "They touchedtheir lows in June and are turning around. Tension between Iranand the West are also substantial factors."

Brent has gained 20 percent from the lows touched in June.The contract had slumped since the year's high of more than $128in March, weighed down by worries that demand growth would slowfurther as a debt crisis in Europe threatened to engulf theUnited States and emerging economies.

Sentiment has improved this month on investor optimism theworst may be over for the global economy.

"A firmer tone of macroeconomic data flow, the lack of anysubstantial weakening in global oil data, plus the lack of anyobvious prompt surplus in physical markets have all combined tohelp accentuate the positive in the market," analysts atBarclays said in a report.

"However, in the context of a global financial and economicstructure that is still muddling through, there does remain astrong possibility of some further intense mood swings in theoil market."

A decline in the dollar is also supporting oil. The dollarindex slipped 0.19 percent on Thursday. The greenback hasbeen under pressure on expectations the Fed would opt for athird round of bond purchases, or quantitative easing, tosupport the economy. A weakness in the currency boostsdollar-denominated commodities such as oil.

Brent will gain further to $107.78 per barrel as it hasbroken above a resistance at $103.22, while U.S. oil will riseto $90.88 per barrel as it has also broken past a resistance,according to Reuters technical analyst Wang Tao.

A surge in Middle East tension provoked supply concerns,however.

Six people were killed in a bomb attack on a bus carryingIsraeli tourists at a Bulgarian airport on Wednesday and Israelaccused Tehran of carrying out the attack, promising a strongresponse to "Iranian terror."

Oil also drew support on fears the 16-month revolt againstSyrian President Bashar al-Assad would worsen after a bomberkilled and wounded his security chiefs and rebels closed in onthe centre of Damascus.

CAPPING GAINS

Yet gains in oil were capped by data from the EnergyInformation Administration (EIA) on Wednesday showing crudestocks in the United States fell less than expected last week ascrude imports rose and refineries scaled back processing rates.